a. Responsibility accounting involves accumulating and reporting data on revenues and costs on the basis of the manager's action who has authority to make the day-to-day decisions about the items; b. Evaluation of a manager's performance is based on the matters directly under his control; c. Responsibility accounting can be used at every level of management in which the following conditions exist: 1. Cost and revenues can be directly associated with the specific level of management responsibility; 2. Costs and revenues are controllable at the level of responsibility with which they are associated; and 3. Budget data can be developed for evaluating the manager's effectiveness in controlling the costs and revenues. d. The reporting of costs and revenues under responsibility accounting differs from budgeting in two respects: 1. A distinction is made between controllable and non-controllable costs. i. A cost is considered controllable at a given level of managerial responsibility if the manager has the power to incur it within a given period of time. It follows that (1} all costs are controllable by top management because of the broad range of its activity; and (2} fewer costs are controllable as one move down to lower level of managerial responsibility because of the manager's decreasing authority. ii. Non-controllable costs are costs incurred indirectly and allocated to a responsibility level. 2. Performance reports either emphasize or include only items controllable by individual manager. e. A responsibility reporting system involves the preparation of a report for each level of responsibility. Responsibility reports usually compare actual costs with flexible budget data. The reports show only controllable costs and no distinction is made between variable and fixed costs. f. Evaluation of a manager's performance for cost centers is based on his ability to meet budgeted goals for controllable costs